The government of India and, in fact, the governments of many countries recognize that the export business is vital for the economy’s growth. However, they also realize that exporters face many challenges, unlike trade within the country. To mitigate this, the government of India offers many facilities like tax refunds and has established the Export Credit Guarantee Corporation.
This article will address the tax refunds exporters receive, what is UTR number, and its role in this process. Tax refunds reduce the burden on exporters and help them improve their cash flow. We will start by looking at exemptions and refunds exporters can avail of. Then, we will understand the UTR number and its role in tax refunds.
What tax refunds are exporters eligible for?
Goods and Services Tax Refunds
Per the GST or Goods and Services Tax framework, exports come under the ‘zero-rated supplies’ category, and exports are not charged GST. As an exporter, you can claim refunds on
- Input Tax Credit (ITC): This is the refund of GST remitted for raw materials, inputs, or services availed for produced goods that are exported
- IGST refund for exports: If you have paid integrated GST on exports, then you can claim a refund
How to claim a GST refund?
- Provide export details (shipping bill, invoices, HSN codes, etc) in Table 6A of GSTR-1
- Declare the IGST paid towards exported goods while ensuring that it matches the customs data
- Once all the details are verified, the exporter will get the refund automatically
Duty Drawback
- If you are an exporter who imports raw materials, consumables, or capital equipment to produce goods for export, you can get a refund of central excise, customs duties, and services taxes paid on the import
- The refund rate will depend on the Brand Rate schedule or the All Industry Rate
How to claim duty drawback?
- Collate export documentation including invoice, shipping bill, bill of lading, packing list, Bank Realization Certificate, payment proof for duty paid
- Declare duty drawback on the shipping bill
- Submit the documents to customs. Once the details are matched, the drawback will be processed and credited to the exporter’s bank account linked to the customs
Terminal Excise Duty (TED)
- You can get a refund of excise duties for goods exempt from export under specific conditions
- This is applicable when manufacturers export excisable goods through exporters or directly
How to claim Terminal Excise Duty?
- Ensure you have paid TED on excisable goods, exported or used the goods for exported goods, and not claimed under any other scheme
- Prepare proof of payment; collect invoices, receipts for duty payment, etc), export invoices, packing list, Bank Realization Certificate (BRC), etc.
- Go to the DGFT portal, get the TED refund application, fill it, and submit it (within in one year export date) along with the related documents. Once approved, the refund amount is credited to the related account
RoSCTL or Rebate of State and Central Taxes and Levies
- If you are an exporter in the apparel and textile sector, you get a rebate on embedded taxes and levies like VAT on fuel, electricity tax, etc., which are not covered under GST
- You get the refund as duty credit scrips that you can use to offset import duties
How to claim rebate under RoSCTL?
- Declare intent to claim RoSCTL while filling the shipping bill
- Collect documents like shipping documents, packing list, export invoice, BRC, etc.along with the RoSCTL declaration
- Once the customs officials verify the documents, the claim is processed in the form of e-scrips. Make sure to use them as per the validity of the e-scrips
RoDTEP or Rebate of Duties and Taxes on Export Products
- This scheme replaces older scheme and refunds indirect taxes
How to claim rebate under RoDTEP?
- Declare intent to claim RoDTEP while filling the shipping bill
- Collect documents like shipping documents and add the correct HS codes along with the RoSCTL declaration
- Once the customs officials verify the documents, the claim is processed in the form of e-scrips. Make sure to use them as per the validity of the e-scrips
As you can see, exporters qualify for any refunds, and it is vital to ensure that you have all the details to seek the refunds on time. The role of UTR in this context becomes essential.
What role does the UTR number play in export tax refunds?
The UTR number is the unique identity for any financial transaction and is usually assigned by the bank when you transfer funds. In the export context, UTR is used to trace payments, reconcile export documents with tax filings, and verify the validity of fund transfers to government accounts.
Here’s how UTR can help with export tax refunds.
Reconciliation of records
- Tax officials use UTR to cross-check tax refund claims with export proceeds
- UTR proves that exporters have been paid in foreign currency. Verifying this is a requirement to claim duty drawbacks or GST refunds
Speeds up the refund process
- Adding the correct UTR to refund applications will ensure that refunds are quick and easy
- Exporters can avoid delays because of mismatched records by adding the right UTR
Acts as payment proof
- If authorities have any queries about tax payments, the UTR can provide the proof
- UTR helps support claims exporters make during audits
Streamlines communication
- Banks need UTR to confirm that the inward remittance against exports has occurred, and this is required for FEMA compliance
- UTR is also essential for authorities to verify if the refund request is eligible
What are some best practices regarding UTR for tax refunds?
UTR is vital in ensuring exporters receive the tax refundsfor which they are eligiblr. Here are some best practices to follow to ensure seamless tax refunds.
- Maintain records of all UTR numbers linked to tax payments and export transactions. One of the ways to ensure this is by using a digital platform to maintain all the details securely while still providing easy access
- When applying for tax refunds, ensure you enter the correct UTR number. Once again, digitalization is an excellent way to ensure this
- Talk to tax consultants and liaise with banks to ensure that you have the correct UTR numbers for all inward remittances. Seek support from consultants to follow the proper procedure
In conclusion, exporters must use an innovative platform to facilitate inward remittances, store export-related documentation, and maintain records. This ensures that manual errors are minimized and provides easy and secure access. At LeRemitt, our entire team focuses on delivering propert support to exporters, whether it is through our intelligent platform, providing trade finance solutions, or more.